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Think back just five months ago when unfavorable seasonality on Wall Street was kicking in and the Federal Reserve was threatening to accelerate the timetable for ending its quantitative easing program. I wrote then, in this column, that the timers who at that time had the best track records were quite bullish, both in their own right and compared to the worst timers (see Hulbert on Markets, "The Smart Money Is Still Bullish," May 23).

Since then, of course, the markets have had to endure not only the prospect of that Fed tapering, but also a government shutdown and the threat of the U.S. Treasury defaulting on its debt. And, yet, despite it all, the Standard & Poor's 500 is up more than 6% since that column appeared.

Now that those dark storm clouds have passed and we're about to begin six months of more favorable seasonality, it's time to check in again to see what the best market timers are now saying.

Fortunately for the bulls, they remain overwhelmingly bullish.

The 25% of Hulbert Financial Digest-monitored stock market timers with the best track records over the last 20 years are recommending that their clients allocate 85% of their equity portfolios to the stock market, keeping just 15% in cash.

The quartile of stock market timers with the worst records over the last 20 years, in contrast, are recommending an equity allocation of 37%.

Average recommended equity exposure of…

Now

Mid-May

Top Quartile of timers

85%

97.90%

Bottom Quartile of timers

37%

31.80%

To be sure, the best timers are not quite as bullish as they were five months ago, while the worst timers are somewhat more bullish. While these shifts are not so large as to be particularly worrisome, the trend is something to take note of and watch carefully. If it were to continue, then the judgment of my best-versus-worst contrast would no longer be bullish.

You might wonder if this best-versus-worst contrast tells us more about the past than the future. If market timers are primarily momentum players and trend followers, for example, wouldn't market tops always be characterized by the best performers being far more bullish than the worst?

Yes—if the top timers were pure momentum players and trend followers. But, in my experience, they rely far less on those approaches than their poorer-performing brethren. To put that another way, the top timers possess more pronounced contrarian instincts than the worst timers.

The last five months are a good case in point: Notice that, in the wake of the market's greater-than-6% rise, the top timers have become slightly less bullish while the worst timers have become more so.

You might also wonder how the top timers can be so bullish in the face of the additional very dark storm clouds that are now brewing on the horizon. After all, the Fed has to walk a tightrope in coming months as it determines how and when to taper, with dire consequences for getting it even slightly wrong. And Washington has merely kicked the can down the road: By no later than January, in the case of the budget, and no later than February in the case of the debt ceiling, Congress and the president must come to agreement. And yet all recent experience suggests this will be next to impossible.

By way of answer, I'll let the top timers speak for themselves. The following are excerpts from the most recent client communications from a few of the top performers:

• Blue Chip Investor (Steven Check): "We will not change our investment approach [because of] the government's dysfunction. Clearly, if one expects a very bad outcome, one wouldn't want to own our currency. So, going to cash (usually meaning money-market funds that own U.S. Treasuries) would be an illogical response."

• The Chartist (Dan Sullivan): "Technically, the market is looking very good indeed… Of utmost importance was the fact that the Daily Advance/Decline Line confirmed the breakout of the other widely followed indexes when it moved through its September highs with authority… The A/D Line had previously recorded its highs of the cycle in the middle of May and failed to confirm the breakout of key averages in July and again in September. The breakout was accomplished with a great deal of upside momentum which was quite positive… Bottom line, you have to give this bull market every benefit of the doubt."

• No-Load Fund Investor (Mark Salzinger): [Contrary to those who think the stock market faces more uncertainty than ever] "the overall macro picture facing investors has cleared up considerably... For example, the possibility of war for the U.S. in the Middle East has decreased substantially… And, with the recent partial change in leadership and tone from Iran, there's also a much lower chance of war with that nation. Meanwhile, Germany reelected Angela Merkel, suggesting increasing stability in Europe. Finally, the U.S. economy continues on a path of modest improvement: enough growth to avoid recession, but not so much as to spur the Federal Reserve Board to reduce monetary stimulus. Interest rates have slipped as a result, which is also good for business. With the actual macro picture looking much better than most people perceive, we move to the fundamentals of the market to determine our equity allocations. Here we see high profitability, decent earnings growth and above-average, though not yet alarming, valuations."

Bottom line?

The challenges facing the market are undeniable and overwhelming. But bull markets always climb a wall of worry. And to believe that those challenges warrant turning bearish, you in effect have to bet that the market timers with the worst long-term records are now going to be right—and that the timers with the best records will now be wrong.

Note that the best timers' bullishness applies to the intermediate term of several months, if not years—and a short-term correction could occur at any time. In fact, one of the advisors in the top quartile of timers—Bob Brinker, of Bob Brinker's Marketimer—says that the market is due for such a pullback, and that investors shouldn't put new money to work in the stock market until such a pullback.